Why Lowering Your ACoS Isn’t the Answer
Sometimes looking at your ACoS can feel like a game of limbo – how low can you go? There comes a point and time where you reach a threshold and can’t go any lower.
Lowering your ACoS isn’t a bad idea, but it shouldn’t be the only ideal. Generally, the lower ACoS, the better, but there are a number of factors that play into how this works with your long-term goals. Our Search Marketing Manager Rene Crandall is here to help you get ready for your next advertising meeting:
“We need to lower our ACoS.”
While working on lowering your ACoS isn’t a bad idea, it shouldn’t be the only advertising goal you have. Focusing only on ACoS can cause other metrics to suffer. Factors to consider when establishing your advertising goals include:
- Brand recognition that’s already established
- Product category/saturation
If you drop your budget in hopes of lowering your ACoS, expect that you might see a decline in sales. To help strike a balance, long-term sustainability for lowering your ACoS typically comes from bidding on the right branded terms.
“What is our RoAS at?”
While your ACoS is the advertising cost of a sale, your RoAS is your return. When you have a well-established brand, you can get a great velocity with a refined RoAS goal. When you have a smaller brand in a saturated category, a lower RoAS is most likely more realistic considering the level of saturation. You will most likely have to spend more on bids since you can’t rely on brand relevance as much to help you win the ad auctions.
“We need new customers.”
If you want your campaigns focused on new customer acquisition then your ACoS should be more lenient. If this is the goal you’ll be bidding on more competitive, category-focused terms. To increase your campaign’s competitive edge for your own branded KWs then striving for a lower ACoS is more realistic since there’s so much relevancy to get traction on branded terms at a lower cost.
It’s important to remember that all of your marketing works together. When looking at customer acquisition, another metric to look at is your channel ACoS, or your campaign spend/channel sales rather than campaign sales. This will help you examine spend at a higher level to help scale appropriately.
“We should pause that keyword.”
Incrementally decrease keyword bids rather than pausing a keyword altogether. This way, if that KW starts to perform better it will still be in the auction and the bid can then be increased, helping overall performance.
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